President Barack ObamaBarack Hussein ObamaJill Biden campaigns for McAuliffe in Virginia Overnight Energy & Environment — Presented by ExxonMobil — Biden administration breaks down climate finance roadmap Pelosi hilariously scolds media for not 'selling' .5T spending bill: 'Do a better job' MORE on Thursday charged banks with teaming up with Republicans to block financial reform as he announced a new fee on the sector.
In a White House speech heavy with populist rhetoric, Obama lobbed an election-year grenade at financial firms and the GOP, which he charged with standing in the way of reforms that would prevent a new crisis.
"The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party to stand in the way of reforms to prevent another crisis," Obama said.
"What I'd say to these executives is this: Instead of sending a phalanx of lobbyists to fight this proposal, or employing an army of lawyers and accountants to help evade the fee, I'd suggest you might want to consider simply meeting your responsibilities and I'd urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or fellow citizens with the bill, but by rolling back bonuses for top earners and executives.
"And more broadly, I am continuing to call on these firms to put greater effort into helping families stay in their homes, to provide small businesses with needed loans and to embrace, rather than fight, serious financial reform," he added.
The president's short address doubled as the White House's official announcement that it would levy a fee on large financial firms. The proposed tax, which Obama said would remain in place "as long as it takes" to recoup funds from the $700 billion bailout, could raise about $90 billion in revenue.
Obama stressed his administration would "recover every single dime" it spent to bail out financial firms on the verge of collapse during the 2008 economic meltdown.
"We want our money back. And we're going to get it," Obama stressed. "And that's why I'm proposing a financial crisis responsibility fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.
"If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers," he added.
The White House's strong political statement arrives as officials continue to grapple with 10 percent unemployment and an economy staggering out of recession. The Commerce Department reported this week that retail sales fell in December by .3 percent.
It also comes as Democrats enter a difficult political season in which they are worried about suffering losses in House and Senate elections in the fall. Republicans have criticized Obama and the Democratic Congress for tax and spending policies, and many Republicans have already taken aim at the new fee on banks.
The fee proposed by the administration would be set on large financial firms, not all of which received direct emergency money, to make up the losses on the government’s bailout efforts during the financial crisis. It would be in place for at least 10 years.
The fee would apply to roughly 50 financial firms each with at least $50 billion in assets, an administration official said on Wednesday. Of those, 35 would be U.S. firms, 15 would be subsidiaries of foreign-owned firms and 27 would be U.S. banks, the official said. The 10 largest firms would likely account for 60 percent of the total fee revenue over the decade, the official said.
The fee could also be continued if there were still a shortfall after a decade.
The administration projects that the government’s $700 billion bailout program will have an overall cost to taxpayers of $117 billion, a much lower sum than previously thought.
But the official said that was still a conservative estimate and that the $90 billion in fee revenue over the decade would cover any ultimate shortfall.
The fee of 15 basis points, or 0.15 percent, would fall on a firm's assets not including its core capital, the official said. Deposits insured by the Federal Deposit Insurance Corporation (FDIC) would not be assessed.
The financial industry is likely to lobby heavily on the fee, and some Republicans have already announced their opposition.
“This is the latest proposal in the Obama administration’s failed attempt to borrow, spend and tax their way into economic prosperity,” Rep. Jeb Hensarling (R-Texas) said earlier on Wednesday. “To think that banks will loan more money if you tax them is beyond economic ignorance.”
The nation’s largest firms have received trillions of dollars in government support through the $700 billion bailout program, guarantees on other assets and other measures from federal regulators and Congress.
While hundreds of banks continue to receive aid under the Troubled Asset Relief Program (TARP), as the $700 billion bailout is known formally, many of the largest and most prominent banks have repaid the aid. They are now preparing to pay out billions of dollars in bonuses.
Meanwhile, the broader economy remains bleak, with long-term unemployment at record levels and the nation’s unemployment rate at 10 percent.
“It is in many ways offensive for those at our major financial institutions to suggest that they can today afford excessive and often outlandish bonuses for their top execs and not make whole the taxpayers for public policies that they have benefited from in extraordinary measure,” the senior administration official said.
The fee would not apply to auto companies, although General Motors and Chrysler received tens of billions of dollars under the TARP program. Small and community banks would fall below the $50 billion threshold and would not face the fee.
American International Group (AIG), the insurer crippled under the weight of derivatives transactions that went sour, would face the fee, the senior administration official said, as would other large insurers. Broker dealers would also face the fee.
Fannie Mae and Freddie Mac, the two housing giants that are in government receivership, would not be subject to the fee.
“In the current structure, in the current situation with Fannie and Freddie, I do not think it would make sense for a taxpayer’s perspective to put this fee on now,” the official said.
This story was published at 6:01 a.m. and updated at 11:58 a.m. and 12:36 p.m.